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Electronically Filed
Supreme Court
SCWC-14-0001160
20-SEP-2016
07:56 AM
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---o0o---
SCWC-14-0001160
CERTIFIED CONSTRUCTION, INC., Petitioner/Petitioner-Appellant,
v.
NANCY CRAWFORD, as Director of the Department of Finance, County
of Hawaiʻi, Respondent/Respondent-Appellee.
(CIVIL NO. 14-1-0303)
SCWC-14-0001190
In the matter of CERTIFIED CONSTRUCTION, INC.,
Petitioner/Petitioner-Appellant/Appellee,
v.
NANCY CRAWFORD, as Director of the Department of Finance, County
of Hawaiʻi, Respondent/Respondent-Appellee/Appellant.
(CIVIL NO. 14-1-0200)
SCWC-14-0001160 & SCWC-14-0001190
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-14-0001160 and CAAP-14-0001190;
CIVIL NOS. 14-1-0303 and 14-1-0200)
SEPTEMBER 20, 2016
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
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OPINION OF THE COURT BY POLLACK, J.
This case arises from the disqualification of
Certified Construction, Inc.’s (Certified or CCI) bid proposal
on a public works project by the County of Hawaiʻi (County).1
After Certified’s bid was disqualified, Certified submitted a
bid protest to the County. The Office of Administrative
Hearings determined that Certified’s protest was a challenge to
the contents of the bid solicitation rather than to the
disqualification of its bid proposal, and thus it concluded that
Certified’s protest was not timely and dismissed the case. On
judicial review, the Circuit Court of the Third Circuit (circuit
court) disagreed, finding that the Office of Administrative
Hearings had jurisdiction to consider Certified’s challenge, and
the case was remanded for further proceedings. On remand, the
merits of Certified’s challenge to its disqualification were
reviewed by a second hearings officer who determined that
Certified failed to demonstrate entitlement to relief. The
decision of the second hearings officer was subsequently
affirmed on review by the circuit court. Following the circuit
court’s second order, Certified appealed to the Intermediate
Court of Appeals (ICA) from the circuit court’s second order,
1
Nancy Crawford as Director of the Department of Finance of the
County of Hawaiʻi is the respondent in this case.
2
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and the County appealed to the ICA from the circuit court’s
first order. The ICA determined that Certified’s protest was
untimely, and thus the ICA concluded the Office of
Administrative Hearings was without jurisdiction to consider
Certified’s protest.
We conclude that the ICA erred in determining that
Certified’s bid protest challenged the contents of the County’s
bid solicitation; instead, Certified’s protest challenged the
County’s disqualification of its bid proposal. Accordingly, we
vacate the ICA judgment on appeal and remand the case to the ICA
to address the other issues presented by the parties in the
consolidated appeal.
I. BACKGROUND
On December 24, 2013, the County issued a Proposal and
Specifications (Bid Solicitation) for “Reroofing for Fire
Maintenance Shop and Fire Dispatch/Warehouse,” Job No. B-4190
(Project). The Bid Solicitation solicited bids for the “new
replacement roof, purlins, roof insulation, flashing,
ventilators, gutters, downspouts, structural steel, painting and
related work.”2 The first page of the Bid Solicitation provides
that in order to be eligible to bid, a bidder must possess a
2
Sealed bids were to be accepted until February 6, 2014.
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General Contractor’s License B, and, in boldface, it directs
bidders to see the attached special notice to bidders:
To be eligible to submit a bid, the Bidder must possess a
valid State of Hawaiʻi, General Contractor’s License “B”.
See Special Notice to Bidders for additional licensing
requirements.
The “Special Notice” to bidders first provides a
“reminder note,” explaining that work must be performed by
appropriately licensed entities and that a general contractor
may not act as a specialty contractor in areas in which it has
no license. The Special Notice identified specialty contractor
classifications C-33, C-44, and C-48 as qualified to perform the
work and meeting the minimum licensing requirements.
Instructions preceded the listing of the specialty contractors
and explained that although the listing provided the minimum
requirements and no additional specialty contractor
classifications were required, the Bidder may list additional
subcontractors at its discretion.3 Following the listing of the
3
The Instructions explaining the listing of the specialty
contractors stated the following in boldface:
Each of the following specialty contractor classifications
listed in the table below have been determined by the
County of Hawaiʻi as qualified to perform all of the work on
this project based on the project’s scope and the County’s
understanding of the State’s licensing requirements and
specialty contractor classifications’ scopes of work. By
way of the minimum licensing requirement stated for this
project, no additional specialty contractor classifications
are required to perform the work; however, the Bidder may
list additional licensed subcontractors at its discretion.
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specialty contractors, there were “special instructions to
bidders regarding specialty contractor classifications and
regarding joint contractors and subcontractors.”4 The Special
4
The special instructions included the following:
SPECIAL INSTRUCTIONS TO BIDDERS REGARDING SPECIALTY
CONTRACTOR CLASSIFICATIONS AND REGARDING JOINT CONTRACTORS
& SUBCONTRACTORS:
. . . .
2) In the circumstance where a specialty contractor
classification license listed in the above table may be
deemed unnecessary by a Bidder due to its intent to employ
a plausible alternative means or method, the Bidder shall
in its Proposal clearly state such intent and provide a
detailed plan that meets with the satisfaction of the
Director. The Director reserves the sole discretion and
right to determine whether the Bidder’s proposed
justification for not listing the required license is
acceptable.
3) In the circumstance where the Bidder is licensed in one
or more specialty contractor classifications required of
the project (whether automatically as a general engineering
contractor “A”, general building contractor “B”, or
outright) and it Intends to perform all or some of the work
of those classifications using its own workforce, the
Bidder shall, in its Proposal, list itself accordingly and
in consideration of the balance of the instructions herein
provided.
4) In the circumstance where a specialty contractor
classification required in the above table may, in part or
in whole (as applicable to the classification’s scope of
work), be within the licensed scope of work of another
listed specialty contractor classification (e.g.
overlapping scopes of licenses), the Bidder shall clearly
delineate in its Proposal the extent of each
subcontractor’s responsibility on the project such that the
Director can reasonably determine which classification is
responsible for the corresponding scopes. Where a listed
specialty contractor classification is rendered completely
unnecessary due to overlapping scopes of work, the Bidder,
in its Proposal, shall clearly state such as the reason for
not listing that respective entity in its Proposal.
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Notice also stated the manner in which challenges to the Special
Notice should be made and indicated that, if no objections were
received, bidders would be presumed to be in agreement with the
specifications of the Special Notice:
Anyone who disagrees with the determination in the above
table shall submit their written objection to the Director
identifying the specialty contractor classification(s) in
question and the justification(s) for such position at
least 10 consecutive calendar days prior to bid opening.
If no such written objections are received by the Director
prior to such date, it will be presumed that all Bidders
and affected parties are in agreement with the listing set
forth above.
Thus, objections by bidders to the instructions in the Special
Notice were required to be submitted at least ten days prior to
bid opening.
On February 6, 2014, bids were opened and evaluated,
and Certified submitted the lowest bid for the Project. By a
letter dated February 14, 2014, from the Director of the
Department of Public Works, the County notified Certified that
its bid was disqualified pursuant to Section 2.2-6 of the
General Requirement and Covenants of the Department of Public
Works and Hawaiʻi Administrative Rules (HAR) § 3-122-33(d)(5).
The disqualification letter stated that the Project required a
C-44 license and that Certified’s proposal failed “to list a C-
44 – Sheet metal subcontractor or to describe an alternate means
and methods by which the work required of this project covered
by this license class would otherwise be legally executed.”
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Certified filed a protest with the County by a letter
dated February 19, 2014. Certified’s challenge was made
pursuant to Hawaiʻi Revised Statutes (HRS) § 103D-71, and it
protested the County’s “disqualification of CCI and rejection of
CCI’s bid” for the Project. Certified’s challenge asserted that
the sheet metal work required for the Project could be performed
under Certified’s C-42 or C-44A licenses. Certified also argued
that nothing in the Special Notice strictly required a C-44
license. Instead, Certified argued, the Special Notice stated
only that the County believed C-44 contractors were qualified to
perform certain work for the Project. Certified noted, “[T]hat
the county believes a certain type of construction work can be
performed under a particular license in no way means that the
same work cannot be performed under another specialty contractor
license.” The County subsequently upheld the disqualification
of Certified’s bid as being nonresponsive to the Bid
Solicitation because Certified “failed to properly propose the
change in specialty licenses in its bid documents.”
Certified filed a request for a hearing with the
Office of Administrative Hearings, Department of Commerce and
Consumer Affairs (OAH). Certified filed a motion for partial
summary judgment, and the County filed a motion for summary
judgment contending, among other things, that Certified’s bid
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was nonresponsive. The County also filed a motion to dismiss
Certified’s request for a hearing, which was granted by the
Hearings Officer. In the “Hearings Officer’s Findings of Fact,
Conclusions of Law and Decision,” the Hearings Officer concluded
that “[t]aken as a whole” the Bid Solicitation required a C-44
license” even though the “[t]he Special Notice to Bidders did
not specifically say that a C-44 specialty contractor license
was required.” Accordingly, the Hearings Officer concluded that
“it was incumbent upon [Certified] to file a written objection
ten calendar days prior to bid opening” in order to challenge
the requirement. Because Certified did not file a protest until
after the bid opening--when its bid was disqualified--the
Hearings Officer concluded that Certified’s protest was untimely
and the OAH was without jurisdiction to consider the challenge.
Certified appealed the dismissal of its protest to the
circuit court. The circuit court held a hearing on Certified’s
appeal and issued its June 16, 2014 ruling (first order).5 The
circuit court found that the Special Notice did not require a C-
44 license for completion of the Project. The circuit court
also found that Certified’s protest of the disqualification of
its bid was based in part on its position that it could properly
5
The Honorable Glenn S. Hara presided.
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perform the Project using its C-42 and C-44A licenses instead of
the C-44 license. Accordingly, the circuit court determined
that the Hearings Officer’s conclusion that a C-44 specialty
contractor license was required by the Solicitation was clearly
erroneous and that Certified’s bid protest was thus timely
submitted. Given that the circuit court concluded that the OAH
had jurisdiction to review Certified’s protest of the
disqualification of its bid, the circuit court vacated the
Hearings Officer’s decision and remanded the matter for further
proceedings.
On remand to the OAH, the merits of Certified’s
protest were considered, and the Hearings Officer ruled that
Certified failed to demonstrate entitlement to relief.
Certified appealed this decision to the circuit court. The
circuit court affirmed this determination (second order), and
Certified then appealed from the second order to the ICA.
Subsequently, the County separately appealed to the ICA from the
circuit court’s first order, which concluded that OAH had
jurisdiction to consider the merits of Certified’s challenge to
the disqualification of its bid and remanded the case to the OAH
for further proceedings.
The ICA consolidated both appeals under appeal number
CAAP-14-0001160. With regard to its appeal of the first order,
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the County argued that the circuit court erred when it
determined that Certified’s protest was timely filed and that
the OAH had jurisdiction to review the protest. The County’s
position was that the Hearings Officer correctly determined that
Certified’s protest was an attack on the contents of the Bid
Solicitation. The County contended that Certified’s argument
that the Special Notice reflected the County’s understanding of
licensing requirements was a “direct[]” challenge of the
contents of the Bid Solicitation.
Certified countered that it challenged only the
County’s disqualification of its Bid Solicitation rather than
its contents, as the circuit court correctly determined.
Certified maintained that an attack on the contents of a
solicitation occurs when a bid solicitation expressly requires
something and the protestor contends that the stated requirement
is unlawful or otherwise invalid. Certified argued that it did
not challenge the contents of the Bid Solicitation because in
contending that the Bid Solicitation did not require the use of
a C-44 licensee, it was not attacking the solicitation itself.
The ICA concluded that the OAH was without
jurisdiction to consider Certified’s protest as Certified’s bid
protest was untimely under HRS § 103D-701(a). The ICA noted
that, regardless of whether or not the Bid Solicitation required
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a C-44 licensed sheet metal contractor, the Bid Solicitation
required bidders to explain in their proposals how they would
accomplish the scope of work without such a specialty
contractor. The ICA also noted that Certified’s protest letter
ignored Special Instruction #2, and the ICA observed that
“throughout the course of this litigation [Certified] fails to
address the Special Instructions and instead simply argues that
the designation in the solicitation of a C-44 licensed sheet
metal contractor was wrong or not required.” Therefore, the ICA
explained, Certified “seeks to revise the Bid Solicitation by
completely omitting the requirements under Special Instruction
#2.” The ICA remanded the case to OAH for dismissal for lack of
jurisdiction.
Associate Judge Daniel R. Foley dissented from the
majority opinion. In his dissent, Judge Foley indicated that he
would affirm the circuit court finding that Certified’s protest
was timely submitted. Judge Foley reasoned that Certified’s
protest letter challenged the rejection and disqualification of
its bid as non-responsive; accordingly, he concluded that
Certified’s protest letter challenged the disqualification of
its bid rather than the contents of the Bid Solicitation. The
dissent then proceeded to consider and indicate how it would
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have ruled upon the remainder of the issues on the consolidated
appeal.6
II. STANDARD OF REVIEW
The appellate standard of review of an administrative
hearings officer’s decision is set forth in HRS § 103D–710(e)
(2012). S. Foods Grp., L.P. v. State, Dep’t of Educ., 89 Hawaiʻi
443, 452, 974 P.2d 1033, 1042 (1999). HRS § 103D-710(e)
provides the following:
No later than thirty days from the filing of the
application for judicial review, based upon review of the
record the circuit court may affirm the decision of the
hearings officer issued pursuant to section 103D-709 or
remand the case with instructions for further proceedings;
or it may reverse or modify the decision and order if
substantial rights may have been prejudiced because the
administrative findings, conclusions, decisions, or orders
are:
(1) In violation of constitutional or statutory
provisions;
(2) In excess of the statutory authority or jurisdiction
of the chief procurement officer or head of the purchasing
agency;
(3) Made upon unlawful procedure;
(4) Affected by other error of law;
(5) Clearly erroneous in view of the reliable, probative,
and substantial evidence on the whole record; or
(6) Arbitrary, or capricious, or characterized by abuse of
discretion or clearly unwarranted exercise of discretion;
. . . .
6
This Opinion addresses only the timeliness of Certified’s protest
as the ICA majority did not address the other issues raised in the
consolidated appeal.
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HRS § 103D-710(e). “The existence of jurisdiction is a question
of law that [this court] review[s] de novo under the right/wrong
standard.” Pac. Lightnet, Inc. v. Time Warner Telecom, Inc.,
131 Hawaiʻi 257, 272, 318 P.3d 97, 112 (2013) (alterations in
original) (quoting Kepoʻo v. Kane, 106 Hawaiʻi 270, 281, 103 P.3d
939, 950 (2005)).
III. DISCUSSION
The dispositive question raised in Certified’s
application for writ of certiorari is whether the ICA erred in
its determination that Certified’s bid protest to the
disqualification of its bid was timely made.
Under HRS § 103D-701(a) (2012), “[a]ny actual or
prospective bidder, offeror, or contractor who is aggrieved in
connection with the solicitation or award of a contract may
protest to the chief procurement officer or a designee as
specified in the solicitation.7 The timeframe for submission of
7
HRS § 103D-701(a) states as follows:
Any actual or prospective bidder, offeror, or contractor
who is aggrieved in connection with the solicitation or
award of a contract may protest to the chief procurement
officer or a designee as specified in the solicitation.
Except as provided in sections 103D-303 and 103D-304, a
protest shall be submitted in writing within five working
days after the aggrieved person knows or should have known
of the facts giving rise thereto; provided that a protest
of an award or proposed award shall in any event be
submitted in writing within five working days after the
posting of award of the contract under section 103D-302 or
(continued. . .)
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a protest is dependent on the particular grievance asserted.
Generally, a protest must be submitted “within five working days
after the aggrieved person knows or should have known of the
facts giving rise thereto.” HRS § 103D-701(a). If the protest
is from an award decision, the statute specifically provides
that the protest must be submitted within five working days
after the posting of the award. Id. If a protest challenges
the content of a solicitation, the statute specifies that the
protest must be submitted before the date set for the receipt of
offers. Id. With regard to challenges to the content of the
solicitation, the statute indicates the chief procurement
officer would not have jurisdiction to review the protest if the
protest was not submitted prior to the date set for offers to be
made: “[N]o protest based upon the content of the solicitation
shall be considered unless it is submitted in writing prior to
the date set for the receipt of offers.” Id.
In this case, Certified submitted its protest within
five days of the County’s disqualification of its bid, which was
(. . .continued)
103D-303, if no request for debriefing has been made, as
applicable; provided further that no protest based upon the
content of the solicitation shall be considered unless it
is submitted in writing prior to the date set for the
receipt of offers.
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after the date set for the receipt of offers.8 Thus, whether
Certified’s protest was timely under HRS § 103D-701(a) depends
on whether its protest is considered a challenge to the
disqualification of its bid or as a challenge to the contents of
the Bid Solicitation. In its protest letter, Certified stated
that the purpose of its letter was to protest the County’s
“disqualification of CCI and rejection of CCI’s bid.”
Certified’s protest does not challenge or seek modification of
the requirements of the Bid Solicitation; rather, it explains
Certified’s interpretation of the requirements of the Bid
Solicitation and why it satisfied the Bid Solicitation. Indeed,
Certified maintained in its letter that the Special Notice
stated only that the County “believes that C-44 contractors are
qualified to perform certain work for the project based on the
County’s understanding of the State’s licensing requirements.”
However, Certified argued, “[T]hat the county believes a certain
type of construction work can be performed under a particular
license in no way means that the same work cannot be performed
under another specialty contractor license.” Thus, Certified’s
protest challenged the disqualification of its bid.
8
It is noted that the Special Notice specifically required
protestations to the contents of the Special Notice to be made “at least 10
consecutive calendar days prior to bid opening.”
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Additionally, the terms of the Special Notice itself
further support Certified’s position that it challenged the
disqualification of its bid rather than the contents of the
Special Notice. The Special Notice states, if no written
objections to the contents were received prior to the deadline
of ten calendar days prior to bid opening, “it will be presumed
that all Bidders and affected parties are in agreement with the
listing set forth above.” Thus, under the terms of the Special
Notice, it should have been presumed that Certified was in
agreement with the requirements of the Special Notice.
Although Certified may have had a different
interpretation of the Bid Solicitation than the one taken by the
Director of the Department of Public Works responsible for
reviewing its bid, “[n]owhere in the letter [did Certified] seek
revision of any solicitation term.” Bombardier Transp.
(Holdings) USA Inc. v. Dir., Dep’t of Budget & Fiscal Servs.,
128 Hawaiʻi 413, 418, 289 P.3d 1049, 1054 (App. 2012) (holding
that a challenge to the rejection of a bid proposal was a
challenge to the rejection of the proposal rather than to the
bid solicitation). Thus, Certified challenged the
disqualification of its bid rather than the contents of the Bid
Solicitation. Certified’s protest to the disqualification of
its bid was timely made as it was submitted within five working
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days of the County’s letter communicating the disqualification
to Certified. See HRS § 103D-701(a) (“[A] protest shall be
submitted in writing within five working days after the
aggrieved person knows or should have known of the facts giving
rise thereto . . . .”).
The ICA majority concluded that Certified’s bid
protest was “based upon the content of the Bid Solicitation
because it necessarily challenges and seeks to omit material
terms of the Bid Solicitation,” including Special Instruction
#2. However, Certified did not seek to modify, erase, or
dispute the appropriateness of Special Instruction #2; rather,
it sought to challenge the disqualification of its bid based on
what it perceived as an erroneous interpretation of Special
Instruction #2 by the County. Regardless of the actual meaning
of Special Instruction #2 and Certified’s compliance or
noncompliance with that term, Certified did not seek a revision
of any terms of the Bid Solicitation. In other words, merely
because a protest implicates an interpretation of the bid
solicitation, it does not mean that it necessarily challenges
the contents of the bid solicitation. There is a significant
distinction between the contention that the terms of a bid
solicitation are invalid and the contention that the terms of
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the solicitation are being misinterpreted and thus misapplied.
This case clearly involves the latter situation.9
IV. CONCLUSION
For the reasons discussed, Certified’s protest to the
disqualification of its bid was timely made, and the OAH had
jurisdiction to consider the merits of Certified’s protest. The
ICA’s April 20, 2016 judgment on appeal is vacated, and the case
is remanded to the ICA to address the other issues presented in
the consolidated appeal.
Jeffre W. Juliano and /s/ Mark E. Recktenwald
Kristi L. Arakaki
/s/ Paula A. Nakayama
for petitioner
/s/ Sabrina S. McKenna
Lerisa L. Heroldt and
Laureen L. Martin /s/ Richard W. Pollack
for respondent /s/ Michael D. Wilson
9
It is noted that this case is distinguishable from Ludwig
Constr., Inc. v. Cty. of Haw., Dep’t of Public Works, PCX-2009-6 (OAH
December 21, 2009), which was discussed by the parties in their briefs. In
Ludwig, a bid was disqualified because it failed to list a C-37 license even
though the County’s solicitation required a C-37 license. Ludwig, PCX-2009-
6, at 5. Following the disqualification of its bid, the bidder in Ludwig
protested the disqualification of its bid, arguing that “[i]n the bid
documents the county asked to use an improper license class on this project.”
Id. at 3 (alteration in original). Thus, the protest letter in Ludwig
challenged the contents of the bid solicitation for the project because it
argued that the requirement itself was improper.
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